Here's the reason why the Bear stearns crisis occurred

Let's look at Bear Stearns to see why it failed. Then we need to see why the federal government is bailing the bankers out even though by law, they're not supposed to.

Bear Stearns is a bank. Banks borrow money and then lend it out, making their profit by paying lower interest rates on the borrowed money than they charge on the loans they make.

The borrowed money is of two kinds. Retail banks take deposits from savers. Those are the savings accounts we know that the government insured for up to $100,000. Financial banks, like Bear Stearns, get loans from investors. But as far as the bank is concerned in both cases they are borrowing money to lend.

The difference between what the bank pays for borrowed money is rarely more than one or two percent. The bank only has to keep enough money on hand to cover repayments to the depositors/lenders who supplied the funds in the first place. This is the reserve requirement. The greater the reserves the bank keeps, the less likely that bad loans will prevent it from repaying depositors/lenders who provided the money in the first place. Currently the Federal Reserve requires commercial banks to keep a 10% reserve behind all loans made for working capital and transactions loans for which there is no security other than the borrower's signature.

As long as the borrowers pay the bank its loans, borrowing money to lend at a higher interest rate is a money machine. What's the flaw? Well, loaning money to borrowers always runs the risk that the borrowers won't pay it back. Then the bank loses not only the interest they were expecting, but also some or all of the money they loaned out. Remember, this money was from depositors or lenders, who are also in danger of losing the money they deposited with or loaned to the bank.

Here is where the government steps in. If the bank can't repay its depositors, the government guaranteed repayment of up to $100,000. That makes lending to a commercial bank (depositing money savings accounts) a lot less risky than lending to a financial bank. (A side effect is that such deposits, being loans to the bank that have no risk, pay a low interest rate.) But the government is not in the business of handing bankers money to lend at a profit and then covering the bank's losses when it makes bad loans. So they demand that the bank have "reserves" - money kept on hand and not loaned out that will be the bank's first source of funds to cover bad loans. A 10% loans means that the bank borrows $100, but can only lend out $90. The bank loses the interest on the $10 kept in reserve, but those funds permit it to repay depositors/Lenders when they demand their money back. It is when those depositors/lenders demand their money back and the bank cannot provide it that a "Run on the Bank" occurs.

But reserve requirements only apply to banks that expect the government to repay its depositors if it can't. Bear Stearns was not a retail bank and had no insurance from the government. By giving up the insurance, Bear Stearns was given the privilege of not keeping reserves and not being subject to bank inspections. It was assumed that the lenders who provided the funds would be sufficiently knowledgeable and informed so that they could measure the risk Bear Stearns was bearing on its loans. For every dollar of capital the company had, it loaned out $32 which amounts to about a 3% reserve. They could make a lot more money than a regulated bank that had to keep a 10% reserve and was prohibited from making the most risky (and most profitable) loans. There was no expectation that the government would step in and save the bank when it underwent a Run.

Only - Bear Stearns was so large, and so deeply embedded in the entire financial system, that it was decided if they went under they could take a number of their lenders with them. The entire financial system was at risk when Bear Stearns failed. So the Federal Reserve provided guarantees of a lot of taxpayer money to Bear Stearns' lenders and then sold it off to J. P. Morgan.

So now the financial banks are on notice that they, too, are protected by government guarantees. Only they don't have to avoid the risky loans and the low capital ratios that made Bear Stearns so vulnerable.

That set the financial bankers up to be able to make the riskiest and most profitable loans, knowing that if the loans go bad the government will bail them out, and if the loans don't go bad, they get the profits.

Even the financial bankers are now saying that some regulation and reporting requirements need to be imposed on the riskiest high-flying financial banks.

Oh, and what caused the credit crisis? These high-flying financial banks were supposedly very knowledgeable about the risks they were taking when they loaned money. Residential mortgages were supposed to be the safest of loans with a very low rate of default. So they were bundled together in great securities with thousands of individual mortgages. The rating agency looked at them, assumed that the good mortgages would cover the risky sub-prime mortgages, and sold the whole package as very safe AAA securities.

When it was learned that the number of bad loans were much higher than previously known, suddenly the lenders providing funds to Bear Stearns and other did not know if they could get back money they loaned those banks. So they quit loaning to anyone depending on such massive mortgage-backed securities. And that turned out to be almost everyone.

Worse, when the mortgage-backed securities were first created and sold, the original documentation did not go with the security. Just a computerized summary of each mortgage. The cost of finding that original paper documentation and having someone review it was impossible to imagine. So no one knows just how risky any mortgage-backed security is.

Since Bear Stearns had only about $3 reserve behind every $100 of loans they had made, no one who loaned money to them had any reason to believe they would get their money back. So all lending to Bear Stearns stopped and all lenders with loans already made wanted their money back - all at once. That $3 reserve was smoke in a high wind.

Bear Stearns was bankrupt and the offer of $2 a share was a gift to the stockholders. There was nothing of any value to back even that $2 per share price. That's what a run does to a bank. But it was too big to fail, so the government had to provide taxpayer money to bail out the bankers who made the bad loans.

Republicans look busy in econmic crisis; Offer no real solutions

Paul Krugman has looked at the new proposals regarding how the government should deal with Wall Street. He's not impressed.

The financial events of the last seven months, and especially the past few weeks, have convinced all but a few diehards that the U.S. financial system needs major reform. Otherwise, we’ll lurch from crisis to crisis — and the crises will get bigger and bigger.

The rescue of Bear Stearns, in particular, was a paradigm-changing event.

So what do the Bush administration gurus propose doing?

Nothing.

They cover that up by pulling out an organization chart and saying that someone (party "A") who used to report to someone else (party "B") will, after their reorganization report to someone new (Party "C".)

Please note the utter lack of any substantial action to either help individuals who are being foreclosed, plan an orderly way to assist failing financial banks who are in trouble because the took on excessive risk and it caught up on them, or apply regulations to financial banks and force greater financial reporting transparency.

But that's what both Bush and McCain prefer. The "Herbert Hoover" approach to economic troubles. Bail out the banks, allow the wealthy to scoop up distressed properties for a song and increase the concentration of wealth, and do nothing at all for the average homeowner or borrower in trouble after the system collapsed.

This "new" plan is not a reaction to the current credit crisis and impending Depression. It is part of the deregulation of financial institutions that the Bush administration has spent 7 years trying to force through, and now that there is a disaster they rename it and continue to try to force it through. And, yes, they ignore the fact that the current financial problems are a direct result of financial deregulation that has come in as a part of the Reagan Revolution.

Krugman calls it the Dilbert Solution. See a problem and bring out organization charts to pretend you are doing anything besides just talking about the problem.

Paul's right.

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Addendum I - 7:59 PM
dday over at Digby's hullabaloo provides a good wrapup of reasons why the current Republican economic proposals are crap.

Barack Obama explicitly connected the current crisis to the bipartisan practice of deregulation. This is part of a culture of laissez-faire economics that has shifted risk to individuals and removed risk from corporations, and Obama's speech talked about the need to radically change that midset with actual regulation instead of putting new names on the same old ineffective regulatory agencies. Corporations for too long have, as Bob Borosage said, been given "the freedom to gamble with other peoples’ money ... protected by lavish campaign contributions and powerful lobbies."

One thing we all know is that John "Let's Schedule A Meeting Sometime" McCain would offer the same Hoover-like do-nothing approach. But it's striking how many connections there are between McCain allies and surrogates and every aspect of the financial crisis. After all, some top campaign advisors of his lobbied for the shady lender Ameriquest, one of his top surrogates Carly Fiorina is a welfare queen whose company paid off her mortgage between 1999 and 2003, the most recent RNC chair is saying that his non-plan to deal with the mortgage crisis is incomplete, and his top economic advisor is perhaps most responsible for the crisis itself:

That person is McCain's economic brains - Ex. Sen Phil Gramm (R-TX) about whom I wrote last Saturday.

Basra combat ending as Iran takes charge; Maliki losing power; Bush irrelevant

After a quickly called meeting to the Iranian holy city of Qom between Iraqi leaders including Mouktada al Sadr and the commander of Iran's Qods brigades, al Sadr ordered his troops to stop fighting Nouri al Maliki's troops. The fighting in Baghdad did stop. The irrelevant American leaders are nowhere to be seen.

The battle for Basra was started without any consultation or coordination with American troops, and the resolution is occurring when the Iranians declare it is time to stop fighting. Here is the report from McClatchy News Service on what happened to cause al Sadr's Sunday statement:

The backdrop to Sadr's dramatic statement was a secret trip Friday by Iraqi lawmakers to Qom, Iran's holy city and headquarters for the Iranian clergy who run the country.

There the Iraqi lawmakers held talks with Brig. Gen. Qassem Suleimani, commander of the Qods (Jerusalem) brigades of Iran's Revolutionary Guard Corps and signed an agreement with Sadr, which formed the basis of his statement Sunday, members of parliament said.

Ali al Adeeb, a member of Prime Minister Nouri al Maliki's Dawa party, and Hadi al Ameri, the head of the Badr Organization, the military wing of the Islamic Supreme Council of Iraq, had two aims, lawmakers said: to ask Sadr to stand down his militia and to ask Iranian officials to stop supplying weapons to Shiite militants in Iraq. [Snip]

In addition to Sadr, who is in Qom pursuing religious studies, Iraqi lawmakers met Suleimani, said Osama al Nejafi, a legislator on the parliamentary committee formed to solve the Basra crisis.

"An agreement was signed," Nejafi said, referring to Sadr. "Iran was part of the problem and an effective part of the negotiations."

Sadr issued a nine-point statement Sunday saying he would renounce anyone who carried arms against the government and government forces. The statement also asked the government to halt all raids against the Mahdi army, end detentions of militia members who had not been charged and implement the general amnesty law.

To preserve the "unity" of Iraq Sadr called for an end to "all armed manifestations in Basra and in all provinces."

The Qom discussions may or may not bring an end to the fighting but they almost certainly have undermined Maliki - who made repeated declarations that there would be no negotiations and that he would treat as outlaws those who did not turn in their weapons for cash. The blow to his own credibility was worsened by the fact that members of his own party had helped organize the Iran initiative.

So the result is that Maliki has lost a great deal of prestige just prior to regional elections, the opposite of what he wanted, while the Iranians have demonstrated they are the most important power in Iraq, notwithstanding the presence of 150,000 American troops.

Here is Juan Cole's take on what happened:

A parliamentary delegation from Prime Minister Nuri al-Maliki's own coalition (mainly now the Da`wa Party and the Islamic Supreme Council of Iraq) defied him by going off to the holy seminary city of Qom in Iran and negotiating directly with Sayyid Muqtada al-Sadr and with the leader of the Quds Brigades of the Iranian Revolutionary Guards, Brig. Gen. Qasim Sulaymani.

As a result of those parleys, Muqtada al-Sadr called on his followers to stand down, though I read his statement as permitting continued armed self-defense, as at Basra where the Iraqi Army is attacking them and the US is bombing them. Significantly, he calls on the Mahdi Army to stop attacking the HQs of rival political parties. That language suggests that the parties are suffering from such attacks and are worried that party infrasture is being degraded ahead of the October 1 provincial elections. The southern parties have essentially defied al-Maliki and Bush to make a separate peace.

The entire episode underlines how powerful Iran has become in Iraq. The Iranian government had called on Saturday for the fighting to stop. And by Sunday evening it had negotiated at least a similar call from Sadr (whether the fighting actually stops remains to be seen and depends on local commanders and on whether al-Maliki meets Sadr's conditions).

Juan Cole also points to reports from McClatchy that show that the cease fire has not yet taken effect in Baghdad, Basra, Diyala, Karbala, Salahuddin, Mosul, or Kirkuk.

The lessons so far? Iraq is a mess, in spite of the surge, as it has been for the five years since Bush invaded that nation. Al Maliki, the leader Bush supports, is losing power, as al Sadr is gaining it. Iran dominates the entire Iraqi landscape too a degree that would have been impossible without the American invasion and the removal of Saddam.

Bush and Gen Petreaus are nowhere to be seen and are having no significant effect on the current violence in Iraq, although American soldiers have been sucked into the fighting.

The sole remaining purpose for American troops in Iraq now is to support the Maliki government as Maliki loses power; and to continue with a presence in Iraq until after the next American President (Democratic) is sworn in next January. This is intended by bush to give the Republicans the political talking point they will aim at the Democrats: "We Republicans didn't pull out of Iraq! You pulled out of Iraq so you Democrats lost Iraq!" Republican sound bytes will never address the fact that there is nothing there for Americans to win. We're just providing combat troops and aircraft to the maw with no prospect of any gain.

That's that state of disaster that is Bush's War in Iraq today.

Suicide attacks are not based on Religion

The reason why so many terrorist are attacking Americans, even committing suicide attacks to do so, is radical religion, right?

Nope. Not according to Robert Pape in his book Dying to Win: The Strategic logic of suicide terrorism. The most prolific users of suicide attacks are the Tamil Tigers of Sri Lanka. They are secular Marxist-Leninists who are demanding their own homeland. Religion is not a cause for them, though it may sometimes be a recruiting tool.

The New York Times provided this summary of his conclusions:

…Since Muslim terrorists professing religious motives have perpetrated many of the attacks, it might seem obvious that Islamic fundamentalism is the central cause, and thus the wholesale transformation of Muslim societies into secular democracies, even at the barrel of a gun, is the obvious solution…

Over the past two years, I have compiled a database of every suicide bombing and attack around the globe from 1980 through 2003—315 in all…The data show that there is far less of a connection between suicide terrorism and religious fundamentalism than most people think.

The leading instigator of suicide attacks is the Tamil Tigers in Sri Lanka, a Marxist-Leninist group whose members are from Hindu families but who are adamantly opposed to religion. This group committed 76 of the 315 incidents, more than Hamas (54) or Islamic Jihad (27). Even among Muslims, secular groups like the Kurdistan Workers' Party, the Popular Front for the Liberation of Palestine and the Al Aksa Martyr Brigades (Fatah affiliated, DL) account for more than a third of suicide attacks.

What nearly all suicide terrorist attacks actually have in common is a specific secular and strategic goal: to compel modern democracies to withdraw military forces from territory that the terrorists consider to be their homeland. Religion is often used as a tool by terrorist organizations in recruiting and in seeking aid from abroad, but is rarely the root cause.

Three general patterns in the data support these conclusions. First, nearly all suicide terrorist attacks -- 301 of the 315 in the period I studied -- took place as part of organized political or military campaigns. Second, democracies are uniquely vulnerable to suicide terrorists; America, France, India, Israel, Russia, Sri Lanka and Turkey have been the targets of almost every suicide attack of the past two decades. Third, suicide terrorist campaigns are directed toward a strategic objective: from Lebanon to Israel to Sri Lanka to Kashmir to Chechnya, the sponsors of every campaign -- 18 organizations in all -- are seeking to establish or maintain political self-determination.

…Before the Sri Lankan military began moving into the Tamil homelands of the island in 1987, the Tamil Tigers did not use suicide attacks. Before the huge increase in Jewish settlers on the West Bank in the 1980's, Palestinian groups did not use suicide terrorism.

And, true to form, there had never been a documented suicide attack in Iraq until after the American invasion in 2003.

Understanding that suicide terrorism is mainly a response to foreign occupation rather than a product of Islamic fundamentalism has important implications for how the United States and its allies should conduct the war on terrorism.

As Daniel Levy (from whom I directly took the NY Times quote) wrote:

Bottom line then – it’s the occupation stupid.

Why are Iraqi's committing suicide to attack Americans? Because we invaded Iraq.

Why did bin Laden attack on 9/11? Because American had troops permanently based in Saudi Arabia, his land.

So America's global war on terrorism should be focused on dealing with blowback from our own policies*, not trying to repress religion in other lands. Of course, that might be a hard-sell to a religious evangelist who was raised on stories of martyrdom for the faith, but it appears that the dying for your own land takes priority over dying for your faith.

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*Economic, diplomatic and military.

The Battle for Basra - II

The New York Times points out that the Battle for Basra between al Maliki's best division (the 14th) and the Mahdi Army (Shiite militia) is not going well for Maliki's troops.

At a news briefing in Basra on Saturday, Iraq’s defense minister, Abdul-Kader Jassem al-Obeidi , conceded that the assault had not gone according to expectations. “We were surprised by a very strong resistance that made us change our plans,” he said.

The assault on Basra appears to have been poorly planned and conducted with too few troops. It is not surprising that it is not going well. Cernig at the NewsHoggers writes:

"Maliki's assault on the Sadrists, painted as a general assault on "criminal militias", but somehow managing to leave his SIIC/Badr Brigade allies well alone, is failing badly. Everywhere, the Mahdi Army are holding their own territories and even expanding the fight into new towns and neighbourhoods. Given the unreasonably small force with which Maliki launched his assault, and the estimated 60% penetration of the region's police by the Mahdi Army which has led to widespread desertions, Fester and I are convinced that Maliki had a good idea this would happen. His main purpose in mounting the assault was to ensnare US occupation forces into stepping into the lead, battling Sadr's forces for him and for his SIIC allies. {Snip]

Maliki is now in a position whereby he might - might - be able to win or stalemate the battle with American assistance, but there's no way he can win the political war he's started. He will either fall or be forced to painfully backtrack to negotiate a settlement which will favor Sadr more than it does himself. He's toast and Sadr, despite the many op-eds written over the last four years claiming the opposite, very much isn't."

Cernig's entire post is well worth reading. He also points to the ongoing war in Mosul that has lasted for months now, the flair-ups of violence in Sadr City in Baghdad as a result of this attack on the Mahdi Army in Basra, and the reports that the Turks are shelling the Kurds in Northern Iraq (if such an entity can still be said to exist.)

Then we get the report from Juan Cole:

The Times of Baghdad reports in Arabic that clashes continued on Friday between Iraqi government forces and the Mahdi Army in Baghdad and the provinces of the middle Euphrates and the south, causing hundreds of casualties, including among women, children and the elderly. The fighting also did damage to Iraq's infrastructure, as well as to oil facilities and pipelines, damage that might run into the billions of dollars.

The US got drawn into the fighting on Friday. US planes bombed alleged Mahdi Army positions both in Basra and in Sadr City in Baghdad (as well as in Kadhimiya). Kadhimiya is a major Shiite shrine neighborhood in northwest Baghdad, and the spectacle of the US bombing it is very unlikely to win Washington any friends among Iraqi Shiites.

Despite the US intervention, government troops were unable to pierce Mahdi Army defenses or over-run their positions.

Al-Zaman says that the police force in Basra suffered numerous mutinies and instances of insubordination, with policemen refusing to fire on the Mahdi Army. The government response was to undertake a widespread purge of disloyal elements.

[Hmm. I wonder where fired policemen with combat training and guns could find another job . . . Maybe with the Mahdi Army?]

The Mahdi Army opened a number of new fronts in the fighting, in Nasiriya, Karbala, Hilla, and Diwaniya, as a means of reducing the pressure on its fighters in the holy city of Karbala. Local medical officials reported 36 dead in the fighting in Nasiriya.

The Mahdi Army used its position near Nasiriya to attack government troops attempting to go south to join the effort in Basra, and is said to have inflicted substantial casualties on them.

In Baghdad, Mahdi Army fighters clashed with government forces in 31 districts.

In the meantime, Prime Minister Nuri al-Maliki called for a decisive military victory and rejected calls by southern tribal sheikhs and a large number of Shiite ayatollahs for him to engage in dialogue and negotiation in order to reach a ceasefire and to save civilians who are threatened with a humanitarian catastrophe from shortages of water and food, as well as lack of medical care.

al Maliki seems to have staked his political future on the outcome of this battle with Mouktada al Sadr's forces, and it may well be that he timed it so that the American forces had to intervene on his side.

Since Gen Petreaus has been negotiating with Mouktada al Sadr, this could be Maliki's effort to force Petreaus and the American forces to support him in his internecine political battles for control of Iraq. There are indications that Dick Cheney may have known this was coming, and is playing some more of his behind the scenes politics both in the U.S. and in Iraq. Is this going to be used by Cheney and the Republicans to ratchet up the difficulties in Iraq so that the incoming Democratic President will be forced to either send in more troops to pacify that nation or remove American troops from the scene and thus be politically vulnerable in American politics to the cry of "You lost Iraq"? This goes back to my theory that the Republicans are using the Occupation of Iraq as a kubuki theater play to manipulate American politics, so that what really happens in Iraq is of almost no interest to the Republicans. All that matters is how they can spin it for American voters.

Mesopotamia is the cradle of civilization, and the term "Byzantine politics" was invented to describe the way politics in Turkey and the Tigris-Euphrates valley works. The Republicans thought they could predict what would happen there as a result of "Bush's War" and they found disaster instead.

American troops will not be successful in Iraq. They will be co opted by one side or the other in their internecine wars and used to fight for things that have nothing to do with America's interests.

America should have learned that by now. The Bush administration is too stupid and proud of their conservative ideology to become aware of reality.

McCain's economic brains - Ex. Sen Phil Gramm (R-TX)

When John McCains says he doesn't know too much about economics, then makes a statement on his economic policy, the question arises, who wrote the statement? A number of people see the hand of ex Texas Senator Phil Gramm, the man who more than anyone else in government was responsible for removing the 1930's Glass-Stegall Act that separated banks into regulated and government insured retail banks and unregulated financial banks and insurance companies and prevented the latter from using funds collected by insured retail banks for risky financial activities.

As Chairman of the Senate Banking Committee, Sen. Gramm got his wife (Wendy Gramm, also a Ph.D. economist) a seat on the Security and Exchange commissions (SEC). Both Phil Gramm and his wife Wendy were in the forefront of financial deregulation of the kind that has led to the merger and consolidation activity of the last decade and to the current credit collapse. At the SEC she proceeded to rewrite the SEC regulations so that Enron, who was operating as a financial market maker in energy markets, was excluded from SEC oversight. She moved directly from the SEC to the Board of Directors of Enron, where she was on the Audit Committee when Enron restated prior year's earnings (meaning the financial statements had been fraudulent) and then collapsed. When Enron collapsed, Wendy Gramm was one of the Directors sued for insider trading and violation of SEC regulations. The lawsuit was settled in early 2005. Go read this article in Salon for more details on Wendy Gramm's work at the SEC and her role in the collapse of Enron.

Lisa Lerer of the Politico today published an article providing more of Gramm's history and his role as John McCain's economic adviser. She provides a great deal of additional detail on Phil Gramm.

Phil Gramm has been as responsible for the current credit collapse and set of failures in Wall Street as any man in recent history, although possibly not quite as much as his fellow libertarian, Alan Greenspan. Gramm is a firm advocate of financial deregulation and small government, and was closely tied to the fraud involved in the Enron collapse. Now he is a key economic adviser to the self-admitted economic naif, John McCain and is being spoken of as McCains Secretary of Treasury of McCain is elected President.

The current financial problems are a direct result of the political philosophy behind the Reagan Revolution, and Phil Gramm and his wife Wendy were two major cogs in the machine that brought the current financial collapse to us. That he is advising McCain on economics is like the fox advising hens on security for the hen house. That's another major strike against a McCain Presidency.

Is America racist? Is Rev. Wright correct?

As David Sirota point out the very media firestorm that surround Rev. Jeremiah Wright proves the truth of what he said. Rather than address what he had to say, he is being pilloryed for being a Black man who says America is racist.

...the intolerance the media lynch mob has shown toward Wright - and the tolerance the same media has shown toward the real extremists around John McCain and Hillary Clinton - is a telling double standard proving Wright's fundamental thesis correct. While Wright has dominated the news, anti-Catholic pastor John Hagee and anti-Semitic Reverend Billy Graham have received scant attention for their close relationships with McCain and Clinton, respectively. The Serious Media have followed modern day Bull Connors like Sean Hannity, Pat Buchanan and Charles Krauthammer into the ugliest gutter - the gutter of racial politics. And these three racist lynch mob leaders will undoubtedly retain their perches on cable networks and on the op-ed pages of Serious Newspapers. They will continue championing what one expert calls "colorblind racism" - the kind of racism that hides itself in platitudes against racism and extremism itself.

It's sick, but what is happening is that the racist white lynch mob is chasing Rev. Wright yelling "He called us racist! Lynch him."

So Rev. Wright, the veteran ex-Marine, has had to cancel his acceptance of an award from the Bright Divinity School at TCU in Fort Worth because of personal threats.

Can't have a Black American preaching that America is a racist nation. Gotta lynch him for that! Attack! Attack!

How the Iraq invasion became such a disaster

In my previous post, The Battle for Basra, I concluded that Iraq is presently a disaster and that the disaster is

... a direct result of the idiocy of invading Iraq in the first place, followed by Jerry Bremer's compounding of the idiocy when he disbanded the Iraqi government and military forces. Removing Saddam might have been a reasonable goal (although the cost of the invasion certainly was not justified by that one goal) but Bremer's idea that Baathists were the same as Nazis after WW II and that he was going to deBaathify Iraq the way the allied occupiers of Germany did that country was a fantasy. The occupation of Iraq was not planned and without such an occupation, the destruction of the local government and military was simply the creation of the chaos that is Iraq today.

What used to be the nation of Iraq has been shattered and destroyed, and American troops are now fighting on one side of an Iraqi civil war in which we have no real interest beyond the protection of the prestige of George Bush and the Republican Party prior to the November 2008 Presidential election.

American troops are also in the unenviable position of protecting the Sunni militias and tribes in Anbar Province from the Shiite government of al Maliki, as well as protecting the Kurds in the North from the Shiite government.

So, having destroyed Iraq as a nation, the American military is currently preventing two civil wars from occurring and actively being sucked into taking sides in the third between the two major Shia factions.

The recently aired Frontline Series Bush's War shows why the invasion became such a disaster. While there is a lot of blame to go around with many people in the Bush administration responsible for a variety of blunders, the most significant blame is that of Bush himself. Blunders occur in war, but in this case the utter lack of leadership from Bush encouraged and created blunders and failed to recognize and correct them. Bush's failures as a leader are quite obvious.

Bush failed to provide direction, coordination and control to Rumsfeld (DoD), Powell DoS), and the Intelligence Community. Worse, Bush took the job of post-invasion planning and operation away from the experts in the Department of State and gave it to Rumsfeld who did not perform the job. The overall coordination job should have been Bush's through the National Security Council, and Bush simply walked off and failed to act when Rumsfeld cut the State Department out of planning the post-invasion operations. Then Bush stupidly let Rumsfeld cut the Intelligence Community out of the operation and replaced their analysis with incompetent material from Doug Feith and his Office of Special Plans (OSP) at the Pentagon.

You'd think the conservatives around Bush would have been ready to invade Iraq competently. They had more than enough time to prepare. It's clear that the top members of the Bush administration wanted to invade Iraq on the day Bush was sworn in, and they were simply looking for an excuse. The events of 9/11 gave them the excuse. It was not a very good excuse, but they forced the invasion of Iraq on America as a response to the al Qaeda terrorist attack on 9/11.

The invasion of Iraq was unnecessary and too expensive for any possible realistic gain. Then, in addition to being essentially rationally purposeless, as the Frontline show clearly demonstrates the invasion was bungled terribly.

Donald Rumsfeld wanted to conduct the invasion, and he wanted no interference. So he went to Bush and got Bush to give the Pentagon responsibility for both the invasion and for the post-invasion planning and occupation. This meant that the State Department was shut out of the planning for the occupation. Then Rumsfeld ignored his Generals when they told him the occupation could not be done on the cheap. Instead Rumsfeld apparently planned to simply turn Iraq over to Ahmed Chalabi and the Iraqi National Congress and get the Americans out. The news reports from 2003 stated that Rumsfeld planned to have no more than about 30,000 troops in Iraq by early 2004.

In short, Bush gave total control of the invasion to Rumsfeld and offered no oversight. He also removed Colin Powell and the State Department from any significant input.

When the Iraqis failed to respond favorably to having Chalabi imposed on them, Rumsfeld and Bush installed Jerry Bremer as leader of the Coalition Provisional Authority. This was a hip pocket decision based on the utter failure of Rumsfeld to permit adequate planning for the post-invasion Iraq. It followed Bush's pattern. Choose someone with impeccable conservative credentials, preferable someone with a business back ground, hand him the job and then ignore him and how he performed it.

Bremer saw himself as the Viceroy of Iraq. A Viceroy has total control of both civilian and military administration of the country, something that members of the Bush administration felt had been lacking in Vietnam. So he showed up in Iraq, took control on May 11, 2003, and on May 23, 2003 issued the order dissolving the Iraqi Army. This was done with so little coordination that many of the principle members of the President National Security Council - the body responsible for ensuring proper coordination of major critical decisions like this - were surprised when he informed them May 22 that he was issuing the order the next day.

Again, bush had chosen an individual, given him a task and failed to direct coordination between him and the other effected parts of the U.S. government. Whether Bremer was freelancing when he dissolved the Iraqi Army (something there were no plans for in Rumsfeld's invasion orders and something which obviously required a much larger U.S. Army in Iraq than existed then or at any time since to deal with) or whether Bremer went to Iraq with instructions to perform the deBaathification as he claims, is not at this time known. But the fact that he could issue such an order with no coordination and no preparation is a total failure of both George Bush as President and of Condi Rice as his National Security Adviser responsible for such intragovernmental coordination.

Then, shortly after Bremer created the Coalition Provisional Authority, Rumsfeld informed him that he had no control over military operations in Iraq. Here are two separate individuals given overlapping authority by President Bush, and although Jerry Bremer was under the impression taht he was in Iraq as America's Viceroy, Rumsfeld simply refused to cooperate. This shows that Bush never gave Rumsfeld and Bremer a clear vision of how the Iraq invasion and occupation was supposed to work, and then when conflicts occurred between those two who he had each given independent authority over the same operation, Bush and Rice failed to coordinate and work out how they would work together. Since Rumsfeld had the power of the Pentagon, all he had to do was refuse to cooperate with Bremer and Bremer was neutered - unless Rice worked out a system of coordination (she didn't) or Bush himself brought the two together and told them how they would work together (he didn't.)

Then, there is Dick Cheney. Cheney made himself the most powerful man in the federal government when, as self-selected vice-President elect chose the people who were loyal to him to put into key federal government jobs. And why was Cheney self-selected as Veep? Because of Bush's failure to control who was Vice President - he delegated that decision to Cheney, who, surprise, surprise, chose himself.

The Pattern of Bush's utter failure as President is clear. He has been a figurehead, with no interest in what actually got done or even what was attempted. He has chosen people who often were incapable of doing the job he assigned them (Rumsfeld is the prime example) and then failed to give them clear guidance regarding what job was to be done. Then he failed to ensure coordination between the various individuals when their jobs should have been mutually supportive (Rumsfeld, Powell and Tenet of the CIA), and failed to make them coordinate their actions when required (particularly Bremer and Rumsfeld and Rumsfeld and the CIA.)

On coordination, that was the job of the National Security Director, Condeleeza Rice, during the invasion and early occupation of Iraq. With Bush's refusal to get involved in government activities and his adverse attitude for telling someone he was failing or - god Forbid - firing someone, Rice was not able to do the job at all. We'll never know if she was capable of it. She clearly failed, but the blame for that failure rests with her boss, George Bush.

So while the Bush administration has failed utterly in every matter of importance, and while a lot of people contributed to that failure, the greatest failure is the failure of leadership and vision that George Bush refused to contribute. He ran a shop that amounted to anarchy among the most powerful members of government, and never stepped in to take control.

Why? Why did Bush fail so abjectly?

As far as I can tell, he has never understood the job of manager or leader, and has no aptitude for such a job, nor interest in putting in the effort to accomplish such a job. He was a passive individual chosen to be made President, and while he seems to enjoy the perks of the job, he has not bothered to exert himself to perform it beyond reading speeches someone else has written for him and accepting the adulation of crowds of carefully selected supporters. Even in public he has been protected from those who would confront him with his many failures.

How did Iraq become such a disaster? It was conducted by the single poorest excuse for a President America has ever endured.

The Battle for Basra

Al Maliki decided on his own that he was going to take on the Mahdi Army, a militia currently in control of Basra. They have been in control of Basra since the British pulled out last year. So without consultation with the Americans, al Maliki attacked the Sadr militia in Basra using his own militia, one originally established in Iran. This is essentially a civil war between two different Shia militias for control of Iraq. Why now?

The reports coming from Iraq suggest that Moqtada al-Sadr is more popular than al Maliki. He could well replace al Maliki in the next election. We've got to ask why al Maliki decided to attack now.

Bush and the Republicans seen an American election coming in November, and al Maliki is their boy. So in spite of not being consulted in advance of the battle, the American troops are now fighting for al Maliki. Here is the report from today's Washington Post:

BAGHDAD, March 27 -- U.S. forces in armored vehicles battled Mahdi Army fighters Thursday in Sadr City, the vast Shiite stronghold in eastern Baghdad, as an offensive to quell party-backed militias entered its third day. Iraqi army and police units appeared to be largely holding to the outskirts of the area as American troops took the lead in the fighting. [Snip]

Maliki decided to launch the offensive without consulting his U.S. allies, according to administration officials. With little U.S. presence in the south, and British forces in Basra confined to an air base outside the city, one administration official said that "we can't quite decipher" what is going on. It's a question, he said, of "who's got the best conspiracy" theory about why Maliki decided to act now.

In Basra, three rival Shiite groups have been trying to position themselves, sometimes through force of arms, to dominate recently approved provincial elections.

The U.S. officials, who were not authorized to speak on the record, said that they believe Iran has provided assistance in the past to all three groups -- the Mahdi Army; the Badr Organization of the Islamic Supreme Council of Iraq, Iraq's largest Shiite party; and forces loyal to the Fadhila Party, which holds the Basra governor's seat. But the officials see the current conflict as a purely internal Iraqi dispute.

Some officials have concluded that Maliki himself is firing "the first salvo in upcoming elections," the administration official said.

"His dog in that fight is that he is basically allied with the Badr Corps" against forces loyal to Sadr, the official said. "It's not a pretty picture."
[Emphasis added]

So although Americans were not consulted in advance, they are now carrying the battle to the Mahdi Army while al Maliki's militia sits on the sidelines.

It appears that al Maliki also has his eyes on the next American Presidential election, as well as on his own next election. By attacking the Mahdi Army now, he might be able to weaken Mudktada's support in the upcoming Iraqi elections, and at the sem time the American troops have to support his attack because Bush is President. Would a Democratic President support such an attack?

The Presidential campaign rhetoric would suggest that the answer is a lot less certain. So if al Maliki wants to be sure of American military support for his side in the civil war between the Shia militias, he had to move now, and do it without asking for military cooperation in advance.

This is a direct result of the idiocy of invading Iraq in the first place, followed by Jerry Bremer's compounding of the idiocy when he disbanded the Iraqi government and military forces. Removing Saddam might have been a reasonable goal (although the cost of the invasion certainly was not justified by that one goal) but Bremer's idea that Baathists were the same as Nazis after WW II and that he was going to deBaathify Iraq the way the allied occupiers of Germany did that country was a fantasy. The occupation of Iraq was not planned and without such an occupation, the destruction of the local government and military was simply the creation of the chaos that is Iraq today.

What used to be the nation of Iraq has been shattered and destroyed, and American troops are now fighting on one side of an Iraqi civil war in which we have no real interest beyond the protection of the prestige of George Bush and the Republican Party prior to the November 2008 Presidential election.

American troops are also in the unenviable position of protecting the Sunni militias and tribes in Anbar Province from the Shiite government of al Maliki, as well as protecting the Kurds in the North from the Shiite government.

So, having destroyed Iraq as a nation, the American military is currently preventing two civil wars from occurring and actively being sucked into taking sides in the third between the two major Shia factions.

For what? Weapons of mass destruction that did not exist and apparently an effort to display to other Middle Eastern nations that America's military was so powerful that if American didn't like how your dictator behaved, they would replace him. In other words, pure stupidity.

Stupidity that McCain wants to carry forward for some unknown reason, perhaps the honor of not retreating from a fight.

So far, 4001 Americans dead in this botched idiocy, Severely wounded over ten times as many, a nation destroyed with uncountable dead, injured and 15% of the population as either internal or external refugees. America's ground forces are of no value anywhere else in the world now, and America's reputation is in tatters.

Welcome to the Bush legacy.

Condi; Racism is U.S. Birth Defect - Obama's speech importatt

Condi Rice thinks Obama's race speech was very important.

Today the Washington Times has published an interview with Condi Rice in which she says

By Nicholas Kralev - Secretary of State Condoleezza Rice said yesterday that the United States still has trouble dealing with race because of a national "birth defect" that denied black Americans the opportunities given to whites at the country's very founding.

"Black Americans were a founding population," she said. "Africans and Europeans came here and founded this country together — Europeans by choice and Africans in chains. That's not a very pretty reality of our founding."

As a result, Miss Rice told editors and reporters at The Washington Times, "descendants of slaves did not get much of a head start, and I think you continue to see some of the effects of that."

"That particular birth defect makes it hard for us to confront it, hard for us to talk about it, and hard for us to realize that it has continuing relevance for who we are today," she said.

Go read the entire interview.

This is a statement by the highest ranking African American in the conservative Republican administration of George Bush, and has been published in the Washington Times, the Mooney-subsidized ultra-right-wing Washington newspaper. Condi's interview is important, the source is important, and the venue of publication will take it to an audience that represents much of the political opposition to improving race relations in America.

I knew that Obama's race speech was an important milestone in America's history of race relations. What I didn't realize was that it may indicate that America is ready to rationally discuss how racism infects our society. This goes way beyond the successes of the Civil Rights Movement is getting the race-restrictive laws off the American law books. This begins to go to the very attitudes and behavior that still contaminates America as a hangover from the attitudes required to hold a substantial portion of the Southern population in chattel slavery.

America may be ready to take the next step towards the American ideals of Liberty and Equality for all Americans. Condi's interview is very important. To find it published in the Washington Times is, in my opinion, even more important. It says that White Conservatives are ready to open a discussion of the problems of race in America instead of just attacking anyone who dares to bring it up.

This is the America I love. Not perfect, but striving towards perfection. It is great to see it happening in public.

It will be very interesting to see if there are any reported reactions to his interviews, especially from the American Old South states.

America is in a nasty deep hole; Electing McCain President means we keep digging it deeper.

What does John McCain really think when asked what a McCain administration would do about foreign policy or the current disaster in the American economy? Harold Meyerson of the Washington Post, unlike most of the McCain-besotted media, tells us what McCain's core beliefs are. Unsurprisingly, they are extremely right-wing conservative. Take his demonstrated beliefs about how to keep America secure:

As early as 1999, McCain was recommending "rogue state rollback" as our policy toward such nations as Iraq. He remains an unabashed advocate of preventive war, as his comments on bombing Iran have made clear, and of permanent war, as his comments on remaining in Iraq have made clear. His advocacy of a missile defense system is rooted in a preference for military unilateralism -- though it may stimulate a new arms race -- over diplomacy. If you liked Bush's foreign and military policy, you'll love McCain's.

Consider this along with the comment published on talking points memo March 20:

McCain has the personality of a Navy pilot, which is to say he is focused like a laser on tactics and maneuvering and has little grasp of overall strategy, nor does he want it; and that is coupled with a total enthrallment of his own rightness.

The guy's point was -- the skills of instant two-step-ahead (but no more) thinking and total faith in one's decision-making are what keep you alive in a cockpit, but it doesn't serve you well in politics (or leadership). It leads to what Josh was noting - an inability to grasp strategy or nuance, and a general lack of self-awareness that comes from self-questioning.

This is quite descriptive of a lot of fighter pilots. It does not mean that many of them are incapable of learning strategic thinking. But McCain got out of the Navy before he ever had any command that required such thinking, and he has certainly never demonstrated a great grasp of the overall picture. As his lack of understanding of the simple distinction between Sunni Muslims and Shiite Muslims demonstrates, he has no knowledge of the general social, historical or cultural environment in what is today America's largest foreign policy problems. Like a fighter pilot, he will fly where the air traffic controller tells him to and then react to the situation he finds there. But he has no real interest in or understanding of what the overall picture that caused him to be sent there is. That's a decision someone else makes, and the pilot just has to trust that they did their job.

So the good fighter pilot can read the immediate situation and react to it optimally, but he has no interest in actually changing the situation before he gets there. Strategic thinking would be to change the situation to one that the pilot who finally got there had major advantages over his opponents. For that, a strategic thinker has to look a long way beyond immediate threats and decisions on who and what to bomb.

Interestingly, fighter pilots can be quite charming. The laser-focus on the immediate tactical situation and the lack of self-questioning makes them fun to be around. But it doesn't turn them into strategic thinkers or strategic-level leaders. But that's just the National Security problems America faces. America now faces economic problems at a level that even the Libertarian Alan Greenspan says are the worst since WW II.

So what would McCain do about the current economic problems? Harold Meyerson also addresses this issue:

On economic matters, that may be because he doesn't seem to have devoted much time or energy to thinking about the economy. That dearth of thought was apparent yesterday [March 25, 2008] in his speech on the financial crisis. Even some of the barons of Wall Street, looking at the mess they've made, have been recommending stepped-up regulation of financial practices and institutions, but not McCain, who called for "removing regulatory, accounting and tax impediments to raising capital." Never mind that a leading cause of our liquidity crisis is that so many financial institutions are exempt from the regulations that would require them to back their investments with actual assets or would enable them just to value the assets that are on their books.

With his laser-like tactical focus, John McCain is looking at his immediate problem, which is getting nominated and elected President. His tactical problem right now it to pull together the fractured Republican coalition behind his candidacy. He will do that the way he has been working to get the Social conservatives on board behind him - he will find out what they want and he will give it to them. He has found out what the social conservatives want by sitting down and asking their leaders, and then he has gone out and presented their positions as his own.

As a navy pilot he knows what foreign policy works. You bomb people until they give up and do what you want. As for economic policy, you step back and let the bankers and financial experts do as they wish without interfering. That's obvious. What would happen to a fighter pilot in combat if he made a decision to quickly fly left and up to avoid an enemy missile and some outsider froze his controls and said "No!"

But economics and banking are not tactical flying. Bankers operate in an artificial man-made environment, and that environment has to be managed for the individuals within it to know how to do their jobs. But that would be strategic thinking, something that John McCain has demonstrated no aptitude for.

Could McCain learn strategic thinking on the job? He has shown no interest or aptitude for it, and at his advanced age (age 72 as of August 26, 2008) he is unlikely to make major changes in his basic thought and behavior patterns.

If you liked Herbert Hoover as a President as he consistently refused to dealing with the Great Depression, you'll love John McCain dealing with the current economic difficulties. Hoover's refusal to deal with the Great Depression had a lot to do with how deep it was and how long it lasted. And if you think that the Cheney-Bush administrations method of dealing with national security threats to America by attacking Iraq instead of the real threats to America and by refusing to understand or deal with the people and cultures with which American is having problems except at the barrel of a gun or by bombing them, then you will similarly love McCain. He is one of the foremost advocates of Gunboat Diplomacy. There is little likelihood that his views will change, either. When told that something he wants is not workable, his reaction is probably going to be to lose his famous temper at whoever is telling him that. McCain's temper is quite famous, (See also Here and here.) and so is his certainty in his own judgment.

A President who loses his temper at being told things he doesn't like cannot deal with things he doesn't like. And with a President, you can't go shopping for someone else to deal with problems because the President is unique. The problems no one else can solve end up on his desk.

So what does this add up to? McCain has little understanding of or interest in the big picture, either in national security or economics. He is also quick to decide things in a tactical, non-strategic way, and quite certain of his own judgment. When disagreed with or otherwise frustrated he resorts to his temper to intimidate those he sees as questioning his judgment, and his immediate reaction to big problems he cannot deal with is either to ignore them (the economy) and let the "experts" deal with them, or bomb them. Since he does not understand the environment the problems come form and has no interest in learning it (like the history, culture and economics of the middle east), his immediate reactions are unlikely to change the situations he faces.

That's why I don't think John McCain is suited to become President. He is a tactical thinker trying to get a strategic thinker's job, and if he gets it America will suffer at least as badly as it has under George Bush.

Iraqis say US should leave Iraq instead of screwing it up more

Charlie Rose had two articulate Iraqi's on to explain what is happening in Iraq and what America should do to help the Iraqi people. Glenn Greenwald shows the segment. Go watch it.

The several things that I particularly recall are one of the two men saying that America first destroyed the Iraqi nation after the Persian Gulf War with the bombings of infrastructure and the sanctions, then in the 2003 invasion they did everything wrong. The Americans are responsible for unleashing the internal strife in Iraq and for destroying any government that could have controlled it.

The Americans can't do anything to improve things. They have no credibility as protectors of democracy since they support dictatorships like Saudi Arabia and Egypt, and they don't know what they are doing even if they had good intentions, which the one Iraqi doubts.

The Sunnis were hired to attack al Qaeda in Iraq, but before the Americans invaded in 2003, there was no al Qaeda in Iraa. The Americans created those terrorists.

There's a lot more, all negative towards the American occupation. Why is this important? As Glenn Greenwald points out strongly, the view of Iraqis themselves are simply never presented in the American media.

I am not surprised at what the two Iraqis say, since I have read Graham Greene's novel "The Ugly American." the story is as true today in the Middle East as it was in Southeast Asia in the 1950's.

I have written several times that Iraq is a great Kabuki theater that presents plays to the American audience and that our leaders interpret for their own political purposes. What's really happening behind the curtains of the stage isn't known to our leaders, nor do they want it known. The only things we are getting from the American government is the information and lies they want to feed it for internal American political responses. Besides giving Bush the opportunity to be a "War President" and Cheney the opportunity to use the American military in the Middle East to influence oil flow, nothing else in Iraq matters to the current American government, and no one in any position of power has any expertise in Iraq, nor to they want it.

When you watch the TV clip, listen especially for the description of what is really happening in Iraq and how the two Iraqi's think we got there. I'd doubt their guess as to what we might to for Iraq other than getting out ASAP is any better than the guess of the American political or military leaders. We are simply in over our heads there, and we were before we stupidly sent in troops.

Krugman on the amazing political silence on the economic crisis

Paul Krugman points to the general silence from McCain, Obama and Clinton on the current economic crisis.

He does point out the idiocy of McCain's economic advisor, Kevin Hassett, "...the co-author of “Dow 36,000” — [who] insisted that everything would have been fine if state and local governments hadn’t tried to limit urban sprawl." He does not point out that McCain's primary economic advisor, ex-Senator Phil Gramm, is the single most responsible individual (besides Alan Greenspan) for the current banking crisis. How? Gramm was the guy who pushed through the removal of the FDR era Glass-Stegall Act which separated retail banking from insurance and security banking and put retail banking under regulation to prevent the kinds of idiocies that have created the current banking crisis.

My bet is that Obama and Clinton haven't brought up the economic crisis because they essentially agree on both the causes and the cures. Such agreement is not going to create a competitive distinction between the two of them, so whichever becomes the Democratic nominee (probably Obama) will use it to distinguish between himself and the fish-in-a-barrel - uh, I mean target, McCain.

Since Bush is doing his best Herbert Hoover non-action routine as America's banking system collapses before our eyes and Ben Bernanke of the fed paddles desperately to try to shore up the mess given us by the Reagan Revolution, the Presidential election is rapidly becoming a competition between Republican fear-mongering and proposals for rational government presented by a half-Black, half-White Democratic candidate.

If America really is the great shining light on the hill that nationalists and nativists like to claim, then fear-mongering will fail completely. Since I happen to think that as great as America really is, it is also deeply flawed, unfortunately fear-mongering has a chance.

Still, I think that if he survives the campaign (I remember JFK, Martin Luther King and RFK quite well, all victims of fear) then I think we will see Barack Obama sworn in as President next January to preside over the worst Recession America has seen since the Great Depression.

But what do I know about the future? It wasn't too many months ago I thought the Presidential race was going to be between Rudy Giuliani and Hillary Clinton. as for right now, it is clearly shaping up to be a race between fear-mongering, voter suppression and crooked elections on one side versus rational approaches to the difficult problems of the economy, the occupation of Iraq, and racism in America that the Bush administration no longer even addresses realistically.

Obama, Racism, Sexism, and the flap over Jerimiah Wright

This has been an interesting week in that a number of the imperfections of American society have been surfaced, a dialog begun, and the media has punted. Digby discusses it all at length.

There's not too much I can add to what Digby wrote. But the conservative use of Rev. Wright's sermon shows such a narrow-minded blind view of some mythical perfection of America that I am amazed. America is a fantastic experiment in how to make a society better. But it is yet an experiment, one with many flaws, surrounding the great American original sin of slavery and the racism that grew from that to the fear-based segregation - a fear-based solution which South Africa copied in 1948 when they passed their Apartheid Laws based on South Carolina's segregation laws.

Racism is not a thing of the past in America. It has only changed, and been removed from written law, and yes, reduced somewhat. But it is hard to look at statistics that show de facto segregation still exists and further statistics that show that altough Blacks, who represent only 11% of the American population and are only 20% more likely to use illegal drugs, they for some strange reason represent nearly half of America's excessive prison population. Racism causes that? Sure. And the racism is based on fear. As Digby points out regarding racism: "...the single most powerful lingering vestige of racism is an irrational fear of an angry black mob --- led by an angry black man." The continuous loop of Rev. Jeramiah Wright's sermon demonstrates that fear perfectly. That loop is on the news because he is Black and seems angry. The Rev. Pat Robertson called for assassinating Hugo Chavez, and Rev. Hagee calles for speeding up the war that will end the human race and destroy all Jews, but do those get endless media loops? Of course not. Those two guys are White, so they don't threaten White conservatives.

The upcoming Presidential election is becoming really complicated. I had originally thought that it would be a battle over the obvious idiocy of the invasion and occupation of Iraq. The recent economic events clearly demonstrate that the three decade experiment with conservative free market - no government economics has led to economic disaster as we enter what even Alan Greenspan, one of the key architects of the economic disaster agrees is the worst economic downturn since the Depression of the thirties. But apparently that's not all.

We are also going into an election that has also surfaced the blatant misogyny that runs through America, and with the half-White, half Black Barack Obama as the Democratic nominee for President, the conservatives are grasping the only competitive weapon they have that might win the Presidency for them - Fear of the Angry Black Man.

Compared to that, the heavy strain of fear of Muslims is really a minor note in the overall symphony of fear that is the basis of John McCain's Presidential campaign.

As I say, this is becoming a complicated Presidential election and it still has over seven months left to run.

Go read Digby. She's right and I don't have time at the moment to explain why, even assuming that I could match her for clarity and expressiveness.

The economic pundit's euphemism for "Depression"

Emptywheel points out that the economic pundits have taken to describing our current economic conditions as being "The worst since World War II."

That's really a pundits' euphemism for "We're in the beginnings of a Depression!" isn't it?

The fact that they know how bad things are getting, and still have to use a euphemism for Depression, is almost as scary as the economic conditions themselves.

It wasn't the publication of the photos, Lynndie. It was what you guys did.

The newspaper this morning published an AP article in which Lynndie England, famous for being in some of the photos out of abu Ghraib, tells the German Stern Magazine that publication of those photos fueled to insurgency.

In an interview with the weekly magazine Stern posted on its Web site Tuesday, England was both remorseful and unrepentant -- and conceded that the published photos surely incensed insurgents in Iraq.

"I guess after the picture came out the insurgency picked up and Iraqis attacked the Americans and the British and they attacked in return and they were just killing each other. I felt bad about it ... no, I felt pissed off. If the media hadn't exposed the pictures to that extent, then thousands of lives would have been saved," she was quoted as saying.

Asked how she could blame the media for the controversy, she said she wasn't the one who leaked the photos.

"Yeah, I took the photos, but I didn't make it worldwide. Yes, I was in five or six pictures and I took some pictures, and those pictures were shameful and degrading to the Iraqis and to our government," she said, according to the report.

So she is blaming the publication of the photos for the insurgency.

Sorry, Lynndie. It was what you did in abu Ghraib that fueled the insurgency. The photos may have made the events more graphic, but every prison visitor knew what was happening there, and every person released from abu Ghraib told Iraqis what the Americans were doing. It wasn't the photos. It was what you did to people - Iraqis - in there that fueled the insurgency.

That said, Lynndie would not have done what she did had her command structure not failed her. Her commanders, all the way up to George Bush, set the tone for what was done there. He continues to set that same tone when he recently vetoed the law against the CIA using torture.

George Bush, Dick Cheney, and Don Rumsfeld are all directly responsible for fueling the insurgency in Iraq, and they left Lynndie England and her fellow enlisted soldiers to take the rap for what the tone that set and the actions they directed. England and her fellow enlisted soldiers were shamefully used by the entire American chain of command as scapegoats for the actions that were taken at the direction of the highest levels of command.

She has every right to be angry, but those who published the photos are not the proper people to be angry at. They showed the American message given to the Iraqis, but they only published it. They were not responsible for creating that message.

---

I am also fully aware that what really was said or really happened and what is reported in the media to have been said or to have happened are usually two very different things. Reporters, like Nedra Pickler of the AP, frequently have their own axe to grind. (I am not familiar with Matt Moore's reputation.)

I would not be at all surprised to find that those who published this story similarly had a complaint about the publication of the abu Ghraib pictures but support the invasion of Iraq. I also recall reports that Lynndie England was rejected from the regular army because she was not up to the intelligence standards, but she got into the Reserves on a waiver. So I don't expect her to have the understanding of the larger picture.

More likely than not, she is again being used by someone else to present a message. The Associated Press is not especially reliable, and a report based on the German magazine "Der Stern" ("The Star") does not fill me with a lot of trust. Unsurprising, but again a damned shame for Lynndie. She is once again very probably a pawn being viciously used by others.

The british explain the recent economic scares

I'm not entirely sure if this is two comedians working a sketch or it's a serious explanation of the economic mess we have watched yesterday and today. I lean toward the explanatory idea. John bird and John fortune, of whom I became aware because I saw these U-tube clips on Atrios.


(7.02 minutes)

Economics and politics of the Fed fund rate

The most recent changes in the Federal Funds rate by the Federal Reserve demonstrate clearly that Alan Greenspan screwed up with his long series of rate increases that started in February 2005. The timing of that start is significant because it is only to months after Bush was reelected in part on the basis of no recession in 12004. It is clear that historically every time there is a recession during a Presidential election year, the Party of the incumbent President is removed and replaced by the candidate of the other party.

Greenspan, fully aware of the effects of the economy on Presidential elections, increased the federal funds rate in 2000 (making a Bush election over Gore more likely) and then lowered the Fed funds rate in 2004 so that Bush would be reelected. The evidence is in the timing of fed fund rate changes.

Note the years in blue which are election years, and the years in yellow which are the year after. In 2000 Greenspan was making the economy more difficult in order to defeat the Democrat. In 2004 he was making it better to elect the Republican.

In 2005 Greenspan knew that the low interest rates had created the housing bubble, so he was trying to stop the bubble. The continued into 2006. Greenspan was still trying to correct the problems he had created in 2001 through 2004. In early 2007 CountryWide, the nations' largest mortgage lender, announced in early Spring that the collapse of the housing bubble was causing economic problems. The result was the credit crunch that became obvious to everyone by Summer 2007, but which they thought could be isolated in just the mortgage markets. We now know that was living in a fool's paradise.

Intended federal funds rate 1997 to present

Year	Date	Rate
2008	March 18	2.25
	January 30	3.00
	January 22	3.50
2007	December 11	4.25
	October 31	4.50
	September 18	4.75
2006	June 29	5.25
	May 10	5.00
	March 28	4.75
	January 31	4.50
2005	December 13	4.25
	November 1	4.00
	September 20	3.75
	August 9	3.50
	June 30	3.25
	May 3	3.00
	March 22	2.75
	February 2	2.50
2004	December 14	2.25
	November 10	2.00
	September 21	1.75
	August 10	1.50
	June 30	1.25
2003	June 25	1.00
2002	November 6	1.25
2001	December 11	1.75
	November 6	2.00
	October 2	2.50
	September 17	3.00
	August 21	3.50
	June 27	3.75
	May 15	4.00
	April 18	4.50
	March 20	5.00
	January 31	5.50
	January 3	6.00
2000	May 16	6.50
	March 21	6.00
	February 2	5.75
1999	November 16	5.50
	August 24	5.25
	June 30	5.00
1998	November 17	4.75
	October 15	5.00
	September 29	5.25
1997	March 25	5.50

(Source Federal Reserve.)

Obama's speech today shows why America needs him for us to get beyond the curse of American Racism

Obama presented a speech that is going down in American history. It leads away from the curse that Racism and racism's related economic class divisions that have presented America for over four centuries, and leads towards the great visions that the Declaration of Independence and the U.S. Constitution express. Here is what I see as the key point he made:

...Most working- and middle-class white Americans don't feel that they have been particularly privileged by their race. Their experience is the immigrant experience — as far as they're concerned, no one's handed them anything, they've built it from scratch. They've worked hard all their lives, many times only to see their jobs shipped overseas or their pension dumped after a lifetime of labor. They are anxious about their futures, and feel their dreams slipping away; in an era of stagnant wages and global competition, opportunity comes to be seen as a zero sum game, in which your dreams come at my expense. So when they are told to bus their children to a school across town; when they hear that an African American is getting an advantage in landing a good job or a spot in a good college because of an injustice that they themselves never committed; when they're told that their fears about crime in urban neighborhoods are somehow prejudiced, resentment builds over time.

Here is a thumbnail sketch of the history.

Southern slavery existed in the South (and Brazil and in the Caribbean earlier) so that the large plantation owners had sufficient cheap labor to maintain their life style. In the American South, poor White Southerners were enlisted in the militia to prevent slave revolts, and were thus offered status over the African slaves by controlling them. The poor Whites didn't have wealth, but this segregation did give them superior status from the system. That also kept the poor Whites from allying with the Negro slaves, another threat the plantation owners faced along with the constant threat of slave revolts.

The plantation owners similarly used the distinction between house slaves and field slaves to separate the black slaves among themselves. house slaves were used to snitch on meetings by the field slaves and were highly rewarded for such snitching, sometimes even with manumission.

All of this "divide and conquer" was perpetuated by the segregation that was established after slavery was outlawed, and has been used by the plantation owners and later the Southern factory owners to prevent effective unions from existing in the South. It also explains the resistance to any form of welfare that is also characteristic of the South. Welfare based on lack of wealth erases the status distinction between poor Whites and poor Blacks. The Southern elites in particular have used "divide and conquer" to control the lower classes for centuries.

It is amazing and delightful to me to see Obama address this directly. It may be one of the healthiest things America has seen regarding discussion of race and class status since the Civil Rights Movement. The corporatists and Republicans are going to hate it.

American slavery grew from the need of Caribbean, Southern American and Northern Brazilian planters to obtain free and disposable labor to operate their factory sugar, indigo, and later cotton plantations to meet the never-before seen international demand for those products, slavery was also a predecessor to much of American anti union industrial strife. In order to use human labor without paying those workers for it, they had to be seen as less than human. This reached its extremes in the Caribbean plantations where slave owners found it least costly to purchase slaves, use them until the died of the labor, and buy cheap replacements. The negative attitudes towards labor that grew out of slavery live on in the mentalities of those who today are union-breakers.

Slavery itself in North and South America was a unique labor solution to a never before set of mass markets. The mass demand in Europe for sugar, indigo, tobacco and later cotton was opened by the brand new style of high seas shipping (along with never-before-seen cannonery) that first permitted discovery of the America and then very rapidly developed even further to exploit it. The new technologies of sailing, navigation and iron-working opened the markets, and slavery was established to solve the problems of cheap labor that the new markets required if people were to become wealthy from the new opportunities. The fact that slavery demanded the dehumanization of individuals whose dark skin labeled them as slaves was not originally seen as a problem by the slavers. It was when that dehumanization of Black Africans created a total slave-holding society that is became obvious (mostly to outsiders) how very destructive the institution of slavery really was.

Slavery in fact helped the development of the Industrial age by permitting plantation owners to meet the demands of the unique mass markets for sugar, indigo, tobacco, and later cotton that were created by international shipping after Columbus opened the routes to the American continents. But to exist, slavery required that society exist in a class ridden society in which "divide and exploit the lower working classes" was the strategy required if slavery itself were to last. Segregation perpetuated the divide and exploit attitudes after slavery was ended by the Civil War, but that was because those attitudes had become seen as the bedrock of society itself by those who held them. Segregation was instituted in the American South to maintain those attitudes that had grown to be seen as central to what Southern society was. They were, and today remain, below the conscious radar of most Southerners even as they are more and more seen as pernicious rather than good.

The racial and class distinctions even today run below the conscious radar as simply part of the socially accepted worldview of what is "Right" and what is "Wrong" and they will last until they are surfaced, spoken of honestly and dealt with properly. America's children and young people are ready, and that's what is attracting them to Obama.

It's going to be hard for Republicans to counter Obama as he speaks calmly of those attitudes that have grown out of the history of slavery. Obama is a racially Black, non-Southern, Harvard-trained lawyer without slave ancestors who is running for President. He is clearly aware of the mutual racial resentments, but he does not himself have a history that has made him a participant in them. That makes it very difficult to attack Obama when he speaks of those attitudes and their very negative effects on our society. He is outside the culture of resentment, yet he is also not a White do-gooder trying to tell others how to live their lives and exist in their society. The traditional attacks against reformers simply don't stick to him.

That's what the complaints about Preacher Wright as an "angry radical Black" are all about. It's also behind the attacks on Barack's wife. Coming out of the tradition of American slavery, they are vulnerable in ways Barack is not.

So his speech is going to get heard and read by a lot of people who would not listen to Martin Luthur King or Jessie Jackson or some northern White do-gooder from the abolitionist tradition. Obama has created an opening that America can exploit to move away from the remaining negative attitudes created to maintain the horror, degradation and exploitation that was slavery.

We need to move through that opening as rapidly as we can. The other side is much closer to the ideal society that America strives to achieve.

Congrats, taxpayers. The American financial industry now owns you.

Paul Krugman has a lot to say today, but the conservative mismanagement of the economy has given him a lot to talk about.

Don't forget, the Reagan administration and deregulation gave use the Savings and Loan bail-out. That was nothing.

if history is any guide, the coming taxpayer-financed bailout will end up costing a lot of money.

The U.S. savings and loan crisis of the 1980s ended up costing taxpayers 3.2 percent of G.D.P., the equivalent of $450 billion today. Some estimates put the fiscal cost of Japan’s post-bubble cleanup at more than 20 percent of G.D.P. — the equivalent of $3 trillion for the United States.

If these numbers shock you, they should. But the big bailout is coming. The only question is how well it will be managed.

Let's say it again. The big bailout is coming. You and I, fellow taxpayers, are going to bail out the wall street bankers who, with their Reagan Revolution allies, created this mess.

How many of us taxpayers does it take to support one financial manager in the style to which he is accustomed?

This is what the conservative movement has brought America to. The Bush administration pushed through the tax cuts for the wealthy so that they could afford their $5000 an hour hookers, and the Republican Congress deregulated Wall Street so that they would be free to get even richer. That's what it meant when now ex-Senator Phil Gramm forced through the repeal of the old FDR era Glass-Steagall Act that separated retail banks from investment banks. Glass-Steagall wouldn't have prevented the financial mismanagement that has created the current credit crisis, but it sure would have lowered the ultimate cost.

Watch what is going to happen, though. The bailout is going to pump a lot of money into the failed Wall Street banks andleave the current managers who brought the failure on in place, still drawing their multi-million dollar salaries and even larger year-end bonuses.

And who is going to pay for all this luxury in the yacht-owning bank-mismanaging class?

You and me, fellow taxpayer, you and me and our kids and grandkids. A significant portion of the value we taxpayers each create from now on is going to the undeserving wealthy to pay for their mismanagement of their banks and our economy. Hey! If it doesn't, they might actually have to move out of their gated communities and give up their luxury cars and expensive vacations.

That's the Republican Reagan Revolution at work. Ain't conservatism great??

Alan Greenspan comes clean

And Kevin Drum reports his statement.

Alan Greenspan today:

The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.

This means, presumably, that he thinks we may be about to enter a recession worse than the one in 1981 — and that it's not going to end until house prices stop falling, which probably won't be until 2010 or so. This is bad, right?

Yeah, this is bad.

The Bush administration and the Fed are in the process of bailing out the bankers who assisted the Bush administration in creating this mess. And what do the people who suffer foreclosures Get?

Let's see. They are being foreclosed because Greenspan lowered interest rates, the conservatives deregulated banks, all while Greenspan refused to regulate loose (even non-existent) mortgage underwriting standards - all in the service of pumping more cash into the economy so that Bush would be reelected in 2004 while he paid for the unnecessary war in Iraq and the ridiculous tax cuts for the wealthy. So while the people who were used to pay for all the conservative Republican extravagances get screwed.

Par for the conservative Republican course, isn't it? Like American CEO's - screw everyone else and walk off with the money.

Hunter S. Thompson would have understood what is going on now

As we watch the federal reserve desperately trying to save the financial markets, we get this report from Greg Palast.

While New York Governor Eliot Spitzer was paying an ‘escort’ $4,300 in a hotel room in Washington, just down the road, George Bush’s new Federal Reserve Board Chairman, Ben Bernanke, was secretly handing over $200 billion in a tryst with mortgage bank industry speculators.

Both acts were wanton, wicked and lewd. But there’s a BIG difference. The Governor was using his own checkbook. Bush’s man Bernanke was using ours.

So? Is there a connection? Palast thinks so.

How? Follow the money.

The press has swallowed Wall Street’s line that millions of US families are about to lose their homes because they bought homes they couldn’t afford or took loans too big for their wallets. Ba-LON-ey. That’s blaming the victim.

Here’s what happened. Since the Bush regime came to power, a new species of loan became the norm, the ‘sub-prime’ mortgage and its variants including loans with teeny “introductory” interest rates. From out of nowhere, a company called ‘Countrywide’ became America’s top mortgage lender, accounting for one in five home loans, a large chunk of these ‘sub-prime.’

Here’s how it worked: The Grinning Family, with US average household income, gets a $200,000 mortgage at 4% for two years. Their $955 monthly payment is 25% of their income. No problem. Their banker promises them a new mortgage, again at the cheap rate, in two years. But in two years, the promise ain’t worth a can of spam and the Grinnings are told to scram - because their house is now worth less than the mortgage. Now, the mortgage hits 9% or $1,609 plus fees to recover the “discount” they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. The Grinnings move into their Toyota.

Now, what kind of American is ‘sub-prime.’ Guess. No peeking. Here’s a hint: 73% of HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of similar-income Whites. Dark-skinned borrowers aren’t stupid – they had no choice. They were ‘steered’ as it’s called in the mortgage sharking business.

‘Steering,’ sub-prime loans with usurious kickers, fake inducements to over-borrow, called ‘fraudulent conveyance’ or ‘predatory lending’ under US law, were almost completely forbidden in the olden days (Clinton Administration and earlier) by federal regulators and state laws as nothing more than fancy loan-sharking.

But when the Bush regime took over, Countrywide and its banking brethren were told to party hearty – it was OK now to steer’m, fake’m, charge’m and take’m.

But there was this annoying party-pooper. The Attorney General of New York, Eliot Spitzer, who sued these guys to a fare-thee-well. Or tried to.

Instead of regulating the banks that had run amok, Bush’s regulators went on the warpath against Spitzer and states attempting to stop predatory practices. Making an unprecedented use of the legal power of “federal pre-emption,” Bush-bots ordered the states to NOT enforce their consumer protection laws.

Indeed, the feds actually filed a lawsuit to block Spitzer’s investigation of ugly racial mortgage steering. Bush’s banking buddies were especially steamed that Spitzer hammered bank practices across the nation using New York State laws.

Spitzer not only took on Countrywide, he took on their predatory enablers in the investment banking community. Behind Countrywide was the Mother Shark, its funder and now owner, Bank of America.

Is that realistic? Consider my previous post Elliot Spitzer; Prostitutes; Why is the DoJ involved?. It really wasn't reasonable for the Department of Justice to focus on Elliot Spitzer, but we know from the US Attorney Purge that this administration has used the criminal law to silence its critics. Why would the Bush administration be so adamant about fleecing mortgage-holders? Because that's the only place left that there has been any money for over two decades. Quoted in my earlier post "What's happened to America? Over half a century of war and the conservative movement.":

In just the past seven years, US household debt almost doubled and federal debt soared by near two-thirds, rocketing by a combined $10.5 Trillion. The total combined debt of households ($14.4 Trillion) and the federal government ($9.2 Trillion) is now 168% of GDP, far higher even than in the brief spike during World War II. All other levels and ratios of debt also have soared far beyond any past precedent.

Yet, this record-shattering explosion of debt stimulus created the weakest seven year job growth (4.4%) and one of the weakest periods of real GDP growth (18.1%) since the Depression: less than 6 million new jobs ($1.8 million of debt per job) and a mere $4 Trillion increase in GDP.
This period began with the collapse of Wall Street's stock market bubble from the late 1990s and ends now with the collapse of Wall Street's housing and other debt bubbles. That such massive mortgage and consumer borrowing, tax cuts and war spending produced such remarkably weak real economic results suggests the months and years ahead could be quite difficult.

Yet, along with Fed rate cuts for cheaper debt, the only policies seriously considered by this year's crop of Wall Street-funded political candidates is more short-term household and federal debt "stimulus." Locked into a failed, 30-year-old ideology of deregulation and debt, there is no option to compete with the remarkably effective industrial and trade policies pursued by China and others.

2008 will be the ninth consecutive year the US economy grows slower than the world's growth while China grows more than three times faster. In the past seven years of sluggish growth, the US accumulated Manufacturing trade deficits (production shortfalls) of over -$3 Trillion with full Current Account trade losses of -$4.3 Trillion; more than the entire nominal growth of GDP.

This is what the Wall Street Republican financed Reagan Revolution has brought America to. Financial collapse and Department of Justice prosecutions of political opponents who expose the failure of the conservative politicians and the Wall Street crooks bankers who have caused the collapse.

Palast makes the connection between the bailout for Wall Street and Elliot Spitzer here:

When the housing bubble burst and the paint flaked off, investors were left with the poop and the bankers were left with bonuses. Countrywide’s top man, Angelo Mozilo, will ‘earn’ a $77 million buy-out bonus this year on top of the $656 million - over half a billion dollars – he pulled in from 1998 through 2007.

But there were rumblings that the party would soon be over. Angry regulators, burned investors and the weight of millions of homes about to be boarded up were causing the sharks to sink. Countrywide’s stock was down 50%, and Citigroup was off 38%, not pleasing to the Gulf sheiks who now control its biggest share blocks.

Then, on Wednesday of this week, the unthinkable happened. Carlyle Capital went bankrupt. Who? That’s Carlyle as in Carlyle Group. James Baker, Senior Counsel. Notable partners, former and past: George Bush, the Bin Laden family and more dictators, potentates, pirates and presidents than you can count.

The Fed had to act. Bernanke opened the vault and dumped $200 billion on the poor little suffering bankers. They got the public treasure – and got to keep the Grinning’s house. There was no ‘quid’ of a foreclosure moratorium for the ‘pro quo’ of public bailout. Not one family was saved – but not one banker was left behind.

Every mortgage sharking operation shot up in value. Mozilo’s Countrywide stock rose 17% in one day. The Citi sheiks saw their company’s stock rise $10 billion in an afternoon.

And that very same day the bail-out was decided – what a coinkydink! – the man called, ‘The Sheriff of Wall Street’ was cuffed. Spitzer was silenced.

Do I believe the banks called Justice and said, “Take him down today!” Naw, that’s not how the system works. But the big players knew that unless Spitzer was taken out, he would create enough ruckus to spoil the party. Headlines in the financial press – one was “Wall Street Declares War on Spitzer” - made clear to Bush’s enforcers at Justice who their number one target should be. And it wasn’t Bin Laden.

And Hunter S. Thompson? He described where we are now in his slogan "When the going gets weird, the weird turn pro." That's where we are now.